Autumn Investment Outlook
Hellen Dalton
Hellen Dalton
Senior Investment Manager

This year’s Autumn Investor Evening took place on 22nd October at the InterContinental Hotel with our host for the evening, Sunday Business Post Markets Editor Ian Guider. Senior Investment Manager, Hellen Dalton takes us through some of the key messages from this year’s event.

A Fund Manager’s World View

Pearse MacManus, CIO of Merrion Investment Managers (MIM) was first to take to the stage, presenting an overview on markets through the investment perspective of MIM. As the fund manager for an award-winning range of funds, Pearse explained that his views have evolved over the last year. This change in perspective has been supported by the critical three pillar investment process that MIM has relied on for over twenty years, which has meant that each fund has been tested over a range of market conditions. The funds are actively managed, and the team has recently taken a more defensive position due to slowing global growth and reduced company forecasts. The US China trade war continues to have a negative impact on global trade as seen by declining corporate profits and an increase in debt. There are always macro reasons for markets to fall, but it is reasonable to have a bearish viewpoint while remaining invested. Pearse explained that the best offence in volatile markets is an effective defence: be active and diversify across all asset classes while taking a five-year view.

Tortoises as Potential Stock Market Winners

Global Strategist, Pramit Ghose invited the audience to think about investing in a negative yield world, the reality for most savers in Europe at present. As the fund manager of the Global Equity Income fund, Ghose seeks out yield across the global equity market. Using the example of Nestlé, he pointed out that while the company bond is negative its shares pay a dividend of 2.3%, while benefiting from growth potential. Pramit runs a concentrated portfolio of approximately thirty five international, blue chip names he calls his tortoises, companies that slowly grow without any nasty surprises.

Property Investment Opportunity – Blackwater Retail Park

Conor McKeon, Head of Corporate Finance announced the upcoming launch of the Blackwater Retail Park property Investment. This big box retail park is located in the growing commuter town of Navan in county Meath. Clients have the opportunity to invest in a well-situated commercial property with Woodies as the anchor tenant. The property will be held within a QIAIF structure (Qualifying Investor Alternative Investment Fund) and will have no gearing. Blackwater is almost fully let and is targeted to yield at least 6%. Conor advised that while high street retail is under pressure from internet shopping, big box retail is not as impacted by online shopping trends. The property will be managed by a new asset manager with extensive experience in the region, who will be tasked with improving the facilities, adding a new Costa Coffee unit, looking into the possibility of adding a fast food outlet and renegotiating leases. The expected lifespan of the investment is five years.

Measured view of Ireland’s future.

Former Taoiseach and EU ambassador to the US, John Bruton was our keynote speaker and gave an insightful, timely and realistic overview of Ireland’s place in Europe going forward. In a riveting speech Bruton highlighted that a hard Brexit remains a real possibility. Johnson’s deal diverges from EU standards, for example on labour and environmental issues, which may lead to difficulty in the UK getting a trade deal with the EU without tariffs. Johnson made a choice between the DUP and the ERG (hardline Tory Brexiteers) and chose the ERG. That choice will result in a border in the Irish Sea. If that occurs there will be considerable medium-term consequence for Ireland. One such consequence would be Ireland having to speak for Northern Ireland in EU negotiations, as EU standards will apply to Northern Ireland.

The world we face after Brexit is much more unpredictable than it might have been 10 years ago, with the easy decisions behind us. Bruton pointed out that Europe was invaded when Russia took Crimea, European territory. It was a major landmark in European history and Europe allowed it to happen with very little in the way of consequences for Russia. Going forward Bruton foresees a need to increase spending on defence across Europe if we wish to defend the peace, our borders and our territory. This was further highlighted by the US decision to pull out of northern Syria. Europe will need a coordinated effort and individual states will need to work together to stand up to future threats.

Turning to the US, Bruton commented that recent action by the US has caused serious doubts about its place on the world stage. Much of this is driven by US fears of a growing China. Bruton claimed that we are moving towards a bipolar world as China joins the US as a super-power. China is now spending more on R&D than the US, it spends more on its military than Europe combined, it is a leader in 5G, and Chinese companies own a wide range of western companies. The US is trying to curb the growth in Chinese power through a trade war which Bruton fears will be unsuccessful.

Lastly Bruton reminded us that Ireland is going to have to become a more active participant in Europe as we will no longer be able to count on the UK to fight alongside us. We will have to do more for ourselves and with our allies than we have in the past. We will be more isolated, positioned between a potentially more insular Europe and a UK that will grow closer to the US. Europe needs to acknowledge that Brexit is a setback for the European project. We will be losing a young, diverse, prosperous, creative member state. Europe will be poorer in every sense, for that reason we must reject looking inward and stagnating. Enlargement has been a success for both “old” Europe and for new member states while embedding democracy. Bruton advised us to be confident in the European project and recognise that the single market is the envy of the world, adding 8-9% in GDP to member states. The project is not complete and there is certainly room for improvement, Ireland must become more actively involved and take a leading role in the future of Europe.

The evening was wrapped up with a Q&A session involving all speakers. Podcast recordings of the event are available here.

Hellen Dalton is Senior Investment Manager with Cantor Fitzgerald Ireland.

To speak with a Portfolio Manager or Account Executive, please phone the Cantor Fitzgerald dealing desk on 01 633 3633.

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